Czech shareholders ripped off by Kožený could gain from sale of Aspen chalet

Виктор Кожены в 1995 году

Czech shareholders who lost millions of crowns to controversial businessman Viktor Kožený in the 1990s, have a strong chance of getting back partial compensation. There is a new possibility that the equivalent of around half a billion crowns gained from the sale of Mr Kožený’s Aspen chalet in the US, could be transferred to the Czech Republic. Shareholders have 10 days in which to file a formal request.

Few in the Czech Republic have forgotten the name of Viktor Kožený, the businessman turned fugitive whose long-defunct Harvard Funds once promised the sky to potential investors. During privatisation in the Czech Republic in the 1990s, thousands signed their voucher books over to “Harvard” confident they would see high returns. It turned out to be little more than fantasy.

Instead of taking care of the shareholders, Harvard Funds bought shares in companies, stripped assets, and transferred money to offshore tax havens. Mr Kožený himself – earning the nickname Pirate of Prague – eventually gained Irish citizenship and relocated to the Bahamas, beyond the reach of the Czech legal system. In July 2010, he – along with a business partner – was sentenced in absentia by a Czech court to 10 years in prison for causing billions of crowns in damages. The rulings were hardly a cause for worry for either man: both appealed the decision, something which will only be addressed by the Prague High Court this autumn – more than two years later.

There is, however, a strong chance that some Czechs could see at least partial compensation: after Mr Kožený’s extradition from the Bahamas to the US in connection with another highly-publicised case was denied earlier this year, US officials contacted their Czech counterparts about funds gained from the sale of Kožený’s Aspen villa: namely the money could be transferred to the Czech Republic rather than being returned to its former owner.

In this way, Czech shareholders ripped off by the financier in the 1990s, could get at least something back. Zdeněk Častorál is the bankruptcy administrator for Harvard Industrial Holdings:

“As the firm’s bankruptcy administrator it is my task to see the return of funds that were siphoned off so that they can be properly divided under bankruptcy proceedings. This is a role that my colleagues and I have not only in Czech Republic but also in numerous countries abroad. We of course followed the US case very closely and when it failed regarding the Aspen property we received an invitation to respond: to put forward a legal request for the funds to be frozen so they could eventually be returned to Harvard Industrial Holdings.”

According to Mr Častorál, there is a strong chance the funds will be returned, doubts over the ownership of the Aspen villa notwithstanding: the mountain chalet, once apparently used by Mr Kožený to clinch deals, is reportedly in his mother’s name. But there is enough evidence the bankruptcy administrator says to prove beyond a doubt the Aspen address was his. Mr Častorál also told Radio Prague that the official request would be put forward within the ten-day limit. Here’s what he said:

Zdeněk Častorál
“We got the information and material in advance and were able to prepare the request. We will certainly be able to put it forward by the ten-day deadline or earlier. As for ownership of the villa, this will depend on the court, but we have enough evidence that the property was without a doubt Mr Kožený’s. It should be possible to to ask for the funds to be transferred as compensation.”

As for Mr Kožený himself, while the British Privy Council rejected his extradition to the US, there is still a slim chance a Czech request – dating all the way back to 2005 – could one day be successful. The conventional wisdom is that the US request needed to be decided first. Closure on the Czech request, however, could similarly take years.